Analysis by an industry leader has examined how the type of borrower affects the likelihood of a mortgage default

Brokers must show borrowers the practical value of their service, an industry analyst has claimed.

On the back of findings from the recent MFAA/Commonwealth Bank Home Finance Index, CoreData principal and founder Andrew Inwood has claimed consumer behaviour has changed, and that utility now reigns supreme in consumers’ list of priorities.

“Post-GFC consumer behaviour is looking for utility all the time. Five years ago all anyone was thinking about in their relationship with their home loan provider and their relationship with the market was opportunity. That’s changed. The thing they’re seeking now is utility, and utility is the function of how much does something cost and what does it do,” he said.

Inwood said this can be seen in the types of home loan products borrowers choose. While lenders jockey to introduce new features, he said consumers are primarily concerned with price.

“Interest rates provide utility. People are looking for a way to sell their products, and they’re certainly looking for a way to bundle features together, but the thing which is most important, the thing which most represents utility in a home loan is the cost,” Inwood said.

The same principle applies to the broker-client relationship, Inwood claimed. He said brokers can see greater success if they are able to clearly communicate the value of their proposition to clients.

“It’s a really critical piece of shopping behaviour. When you’re talking to people in the process of buying a house about entering into a relationship with you, it’s important that you can very clearly articulate the utility of what you do. If you can get to that conversation, your ability to close deals and to bring deals forward is going to rise substantially,” Inwood said.

But utility and price are not the only things borrowers value. He said consumers are also concerned about the know-how of home loan providers and brokers.

“Underneath utility, the next most important thing you can show them is the idea of competence. You can’t actually tell someone you’re competent. You have to display it,” he said.

By showing both the value of their service and demonstrating competence, Inwood said brokers could find a higher level of success with borrowers.

“At the moment, if you can show someone that you can provide utility and you can show competence, then all those scores in terms of your ability to close deals are going to leap substantially,” he said.